CLIPPER EXXPRESS COMPANY
Financial Statements
December 31, 1993 and 1992
(With Independent Auditors' Report Thereon)
Independent Auditors' Report
The Stockholders and Board of Directors
Clipper Exxpress Company:
We have audited the accompanying balance sheets of Clipper Exxpress Company
as of December 31, 1993 and 1992, and the related statements of earnings and
retained earnings and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Clipper Exxpress Company as
of December 31, 1993 and 1992, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted
accounting principles.
KPMG Peat Marwick, LLP
April 15, 1994
CLIPPER EXXPRESS COMPANY
Balance Sheets
December 31, 1993 and 1992
Assets 1993 1992
Current assets:
Cash and cash equivalents $ 908,065 $ 2,141,191
Trade accounts receivable, less
allowance for doubtful accounts of
$682,702 in 1993 and $165,063 in 1992 14,274,056 10,271,594
Other receivables 872,595 646,545
Notes receivable - affiliate 300,000 --
Prepaid expenses 216,650 180,415
----------- -----------
Total current assets 16,571,366 13,239,745
----------- -----------
Notes receivable - affiliate 1,447,565 --
Property and equipment, at cost:
Land -- 152,090
Building -- 929,653
Service and administrative equipment 1,353,996 2,732,377
Other 98,665 257,327
----------- -----------
Total property and equipment 1,452,661 4,071,447
Less accumulated depreciation (860,343) (2,696,598)
----------- -----------
Net property and equipment 592,318 1,374,849
----------- -----------
Total Assets $18,611,249 $14,614,594
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term debt $ -- $ 61,353
Accounts payable 10,983,372 7,625,993
Accrued expenses and other liabilities 1,506,957 1,236,518
----------- -----------
Total current liabilities 12,490,329 8,923,864
----------- -----------
Long-term debt -- 21,492
Deferred gain on sale of buildings 1,430,202 143,576
----------- -----------
Total liabilities 13,920,531 9,088,932
Stockholders' equity:
Common stock, $.01 par value. Authorized
10,000 shares; issued and outstanding
5,414 shares 54 54
Additional paid-in capital 1,263,931 1,263,931
Retained earnings 3,426,733 4,261,677
----------- -----------
Total stockholders' equity 4,690,718 5,525,662
----------- -----------
Total Liabilities and
Stockholders' Equity $18,611,249 $14,614,594
=========== ===========
<FN>
See accompanying notes to financial statements.
</FN>
CLIPPER EXXPRESS COMPANY
Statements of Earnings and Retained Earnings
Years Ended December 31, 1993 and 1992
1993 1992
Revenue $106,165,420 $105,572,021
Purchased transportation services 87,548,985 85,151,761
------------ ------------
Gross margin 18,616,435 20,420,260
------------ ------------
Indirect expenses:
Salaries, wages and benefits 10,045,189 10,034,270
Occupancy and supplies 2,081,205 2,104,022
Selling, general and administration 1,816,277 1,787,964
Professional services 485,971 418,220
Depreciation 255,900 264,700
State income taxes 87,102 129,645
Insurance 112,259 117,165
Other 1,329,501 230,707
----------- -----------
16,213,404 15,086,693
----------- -----------
Operating income 2,403,031 5,333,567
----------- -----------
Nonoperating income (expense):
Interest income 18,717 44,549
Interest expense (8,567) (9,950)
Other, net 275 1,036
----------- -----------
10,425 35,635
----------- -----------
Net income 2,413,456 5,369,202
Retained earnings at beginning of year 4,261,677 3,223,675
Dividends paid (3,248,400) (4,331,200)
----------- -----------
Retained earnings at end of year $ 3,426,733 $ 4,261,677
============ ============
<FN>
See accompanying notes to financial statements.
</FN>
CLIPPER EXXPRESS COMPANY
Statements of Cash Flows
Years Ended December 31, 1993 and 1992
1993 1992
Cash flows from operating activities:
Net income $2,413,456 $5,369,202
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 255,900 264,700
Loss on disposal of computer equipment 343,419 --
Interest paid on settlement with
former stockholder -- (413,263)
Amortization of deferred gain on sale
of buildings (28,715) (28,715)
Decrease (increase) in receivables (4,176,076) 558,322
Decrease (increase) in prepaid
expenses (36,235) 12,870
Increase (decrease) in accounts
payable and accrued liabilities 3,627,818 (1,677,721)
---------- ----------
Net cash provided by operating
activities 2,399,567 4,085,395
---------- ----------
Cash flows from investing activities:
Purchase of equipment (251,448) (186,062)
Proceeds from sale of Jersey City
facility 250,000 --
Notes receivable from affiliate (300,000) --
----------- -----------
Net cash used in investing
activities (301,448) (186,062)
----------- -----------
Cash flows from financing activities:
Dividends paid (3,248,400) (4,331,200)
Principal payments on debt (82,845) (56,230)
----------- -----------
Net cash used in financing
activities (3,331,245) (4,387,430)
----------- -----------
Net decrease in cash and cash
equivalents (1,233,126) (488,097)
Cash and cash equivalents at
beginning of year 2,141,191 2,629,288
---------- ----------
Cash and cash equivalents at end of year $ 908,065 $2,141,191
========== ==========
CLIPPER EXXPRESS COMPANY
Statements of Cash Flows, Continued
Years Ended December 31, 1993 and 1992
1993 1992
Supplemental disclosure of cash flow
information:
State income taxes paid $ 120,258 $ 80,177
========== ==========
Interest paid $ 4,632 $ 423,213
========== ==========
Sale of Jersey City facility in
exchange for note receivable $1,500,000 $ --
========== ==========
<FN>
See accompanying notes to financial statements.
</FN>
CLIPPER EXXPRESS COMPANY
Notes to Financial Statements
Years Ended December 31, 1993 and 1992
(1) Summary of Significant Accounting Policies
Nature of Business
Clipper Exxpress Company (the Company), a Delaware corporation, is a
transcontinental general commodities freight forwarder, specializing in
less-than-trailer load (LTL) shipments, and a shipper's agent,
specializing in the arrangement of door-to-door movements of trailer
load (TL) shipments of general commodity freight throughout the United
States. As a freight forwarder, the Company arranges the movement of
merchandise from its point of origin to its destination with railroads
and over the road carriers acting as the source of transportation, which
allows for direct nonstop service to major metropolitan areas. As a
shipper's agent, the Company arranges all the components of the movement
of TL freight for the customer from the point of origin to its
destination, including pickup and delivery, railroad services,
monitoring of the shipment's progress, and consolidation of billing.
Property and Equipment
Depreciation is provided for using straight-line and accelerated
methods over the estimated useful lives of the respective assets,
generally 5 to 10 years for equipment and 20 to 30 years for buildings.
Loss and Damage Claims
Estimated loss and damage claims against the Company are accrued for
when incurred. In most instances, the Company files a counterclaim
against the line haul carrier.
Revenue Recognition
The Company records revenue and corresponding expenses on all freight
movements on the date the shipment moves.
Income Taxes
Federal income taxes are not reflected in the accompanying financial
statements because the revenue and expenses of the Company are
reportable in the individual Federal income tax returns of its
stockholders, who have made an S corporation election.
CLIPPER EXXPRESS COMPANY
Notes to Financial Statements, Continued
State income taxes are provided for and included in operating expenses
in the financial statements for those states in which the Company is
subject to state income taxes.
Statement of Cash Flows
For the purposes of reporting cash flows, cash and cash equivalents
include cash on hand, amounts due from banks, and short-term
certificates of deposit with original maturities of three months or
less, which are recorded at cost.
(2) Line of Credit
The Company has a revolving line of credit with a bank for up to
$3,000,000. No borrowings were outstanding at December 31, 1993 or
1992. Letters of credit issued by the bank reduce the amount of the
line of credit available.
(3) Benefit Plans
The Company has a defined contribution retirement benefit plan
covering eligible employees. Under the plan, the Company makes annual
contributions based upon the criteria set forth in the plan. Company
contributions reported in the statements of earnings amounted to
approximately $573,000 and $553,000 in 1993 and 1992, respectively.
(4) Related-party Transactions
The Company performs various management and administrative services
for two affiliated companies, Agricultural Express of America, Inc. and
Agile Freight System, Inc. Fees received by the Company for services
rendered approximated $218,000 in 1993 and $238,000 in 1992.
On January 20, 1988 the Company sold its corporate office facility at
the appraised market value of $2,500,000 to the Lemont Partners, a
partnership owned by the Company's stockholders. The Company leases the
office facility from the partnership under an operating lease through
December 31, 1997 with annual lease payments of approximately $260,000.
The gain on the sale of the facility of $287,000 has been deferred and
is being amortized as a reduction of rent expense over the term of the
lease. Rent expense payable to Lemont Partners for the corporate office
facility and terminals was $385,000 in 1993 and $374,000 in 1992.
CLIPPER EXXPRESS COMPANY
Notes to Financial Statements, Continued
On December 31, 1993, the Company sold its Jersey City facility at the
appraised market value of $1,750,000 to the Lemont Partners, a
partnership owned by the Company's stockholders. The Company leases the
facility from the partnership under an operating lease through December
31, 1998 with annual lease payments of approximately $168,000. The gain
on the sale of the facility of $1,315,000 has been deferred and is being
amortized as a reduction of rent expense over the term of the lease.
The Company has a note receivable from Agile Freight System, Inc. The
note is due on demand and bears interest at a variable rate (3.79% at
December 31, 1993).
The Company paid Agile Freight System, Inc. approximately $4,787,000
and $4,762,000 for long-haul road transportation and cartage in 1993 and
1992, respectively.
(5) Commitments and Contingencies
As of December 31, 1993, the Company had outstanding letters of credit
of $250,000 which guarantee payments due to certain railroad carriers.
The Company leases revenue equipment under a lease agreement
classified as an operating lease. The revenue equipment is subleased on
the same terms to an affiliated company. The remaining lease obligation
under the agreement is approximately $196,000 in 1994, $196,000 in 1995,
and $82,000 in 1996.
The Company leases its corporate office facility, terminals and
computer and other equipment under lease agreements classified as
operating leases. The long-term rental obligations as of December 31,
1993 are as follows:
Year Affiliate Nonaffiliate
1994 $549,000 $486,000
1995 549,000 434,000
1996 549,000 356,000
1997 549,000 187,000
1998 238,000 99,000